Gastro-nomics

Oatly’s Upcoming $10 Billion IPO Was 20 Years in the Making

With a Super Bowl ad, a massive Starbucks deal, and a public offering on the way, Oatly is suddenly everywhere. Just don’t call it milk.

Photo Illustration: Save As/Medium; Source: Getty Images, Oatly

Gastro-nomics is a column about the intersection of food, business, and culture.

My initiation to Oatly, the Swedish alternative-milk darling, came in the storybook way that chief marketing officers dream about. The barista at my precious south Brooklyn neighborhood coffee shop recommended it back in 2018 as a way to supercharge my coffee habit. Apparently, he wasn’t the only barista making the recommendation: Later that year, the Great Oatly Shortage arrived — a famine so dire it led coffee shop operators and oat milk fanatics to seriously consider ponying up $200 for 12-carton packs of the plant-based milk to strangers on the internet. Now, with the help of a $15 million processing plant in New Jersey, Oatly is everywhere.

The company has been around since the 1990s, but its recent journey from obscurity to cult status to ubiquity is the result of good branding, great timing, and a calculated global push. After more than 20 years in operation, Oatly debuted in the American market in 2016, long after the backlash toward terms like “foodie” and “third-wave coffee” had blown away like so much quinoa chaff and finickiness about food had become a consumer virtue instead of a social liability. Still, Oatly, which created the now-ascendant oat milk category all by itself, was entering a field crowded with dairy-milk alternatives made from the likes of soy, almond, pea, coconut, and rice. That’s where the company’s quirk came in.

Oatly’s early marketing strategy for the United States involved the deployment of a dedicated “barista edition” of its product, which successfully mimicked the texture of dairy milk in highfalutin coffee drinks like lattes and cappuccinos. In describing the difference between oat milk and, say, almond milk, it’s typical to see words like “mouthfeel” and “frothiness” enter the chat. As a result, the buzz about Oatly got around in a hurry, especially among status-seeking coffee snobs.

For now, a term like “veggie burger” is permitted for plant-based meats in the E.U., while “vegan cheese” is banned for items like nondairy cheeses.

Then there are the ads. Designed in a big, chunky font and placed in high-traffic urban areas like subway stations and the sides of buses, Oatly ads are often self-deprecating, self-aware, and a little weird. These unconventional flourishes add up to a form of anti-marketing that tends to beget its own media coverage and a fair share of LinkedIn case studies. Last, and perhaps most important, there is Oatly’s mission-driven argument, which posits that dairy milk is bad on animal welfare and environmental grounds, while Oatly is your vegan-friendly pal. (Meanwhile, almond milk, which still holds the title of most popular dairy alternative by a wide margin, has its own environmental issues.)

With consumption of dairy milk in the United States down 40% since the 1970s, lobbyists, farmers, and regulators have been going on the offensive. Last year, in an effort led by the Swedish Dairy Association, the European Trademark Office refused to grant Oatly a trademark for its slogan “It’s like milk, but made for humans” for the second time on grounds that it was misleading and made dairy milk seem dangerous. (The European Union General Court later overruled the decision in January.) Around the same time, a measure known as “the dairy ban,” which restricts the use of words like “yogurt,” “milk,” and “cheese” to describe nondairy products passed in the European Parliament. For now, a term like “veggie burger” is permitted for plant-based meats in the E.U., while “vegan cheese” is banned for items like nondairy cheeses. Similar labeling initiatives have been taken up in the United States.

Since 2018, when Oatly pulled in about $110 million in the United States alone, company sales have essentially doubled each year; it projects $800 million in sales this year.

This disparate combination of outreach, dairy outrage, and widely noted Oatly shortages, including one late last month, has only helped boost the brand’s visibility and sales. Since 2018, when Oatly pulled in about $110 million in the United States alone, company sales have essentially doubled each year; it projects $800 million in sales this year. Oatly has also expanded with new products like oat milk ice cream (or what the company calls “frozen desserts”) and oat milk yogurt (or “oatgurt”).

Finally, in 2021, the company hit three of the highest benchmarks in the life of a food product. The first was a memorable if polarizing Super Bowl commercial featuring Oatly CEO Toni Petersson jamming on a keyboard in a field of oats and singing off-key about no-cow milk. There was more than a little to unpack about the intentionally bad stunt, which the company anticipated by making a limited stash of free T-shirts that read “I Totally Hated That Oatly Commercial” available on its website.

Then, last month, Oatly made its national debut in every Starbucks across the United States following a successful test run in the Midwest last year. The arrival of Oatly in a 15,000-store coffee chain offers the kind of boon that turns a relatively niche product spoken about in hushed barista whispers into a product your uncle might ask about at Thanksgiving. (Dunkin’ has also added oat milk to its national menus but went with Oatly competitor Planet Oat instead.)

The arrival of Oatly in a 15,000-store coffee chain offers the kind of boon that turns a relatively niche product spoken about in hushed barista whispers into a product your uncle might ask about at Thanksgiving.

The biggest test for Oatly will come in the form of its plans to go public later this year. Industry observers are already speculating that Oatly could reach a $10 billion valuation. But for a company whose image cleaves so tightly to idiosyncrasies and mission, it won’t be an easy transition. Even the most idealistic companies tend to get milked dry of their morals once froth-mouthed shareholders get involved.

Journalist. Author of Drive-Thru Dreams. The Atlantic alum. Work in The New York Times, Wall Street Journal, Washington Post, Texas Monthly, and elsewhere.

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